A Board Member Invested Over $110K in Kohl’s Corporation (KSS)

According to a Form 4 filed with the SEC, on April 2nd Kohl’s Corporation (NYSE:KSS) Board member Stephanie Streeter directly purchased 2,500 shares of stock at an average price of $45.38 per share. This brought her direct holdings to a little over 6,400 shares if restricted shares are included; therefore, it is a significant percentage increase in her stake in the company. For an insider to buy shares in their company at all, we would think they would have to be more confident than usual in its prospects; otherwise, economic theory would suggest that it would be smarter to diversify wealth away from the company rather than further increase company-specific risk. Studies of insider trading have shown that stocks bought by insiders narrowly outperform the market on average (read our analysis of studies on insider trading).

Kohl's Corporation (NYSE:KSS)

Kohl’s Corporation (NYSE:KSS) increased its revenue by 3% in its most recent fiscal year (which ended in early February 2013) compared to the previous fiscal year, though same store sales were flat. In addition, the company’s costs were also considerably higher and so earnings fell by 16%. Numbers for the fourth quarter of 2012 versus a year earlier were essentially in line with those for the rest of the year. Kohl’s Corporation (NYSE:KSS) brought in $1.3 billion in cash flow from operations, which actually less than they spent in total on share buybacks and dividends (the stock pays a 3% dividend yield, going by current prices and recent dividend payments).

At a market capitalization of $10 billion, the department store trades at 11 times trailing earnings. A multiple at that level would be appropriate for a company with stable earnings, and we’re not convinced that Kohl’s Corporation (NYSE:KSS) can sustain its current financial performance given that its net income has been down in the past year. Analyst expectations are for very low growth, with a forward P/E of 10. Anthony Bozza’s Lakewood Capital Management reported a position of 770,000 shares in Kohl’s Corporation (NYSE:KSS) at the end of December (see Bozza’s stock picks) while Pzena Investment Management disclosed ownership of a little over 650,000 shares (find Pzena’s favorite stocks); however, these positions are small compared to the largest positions in other similarly size retailers.

Other department stores include Macy’s, Inc. (NYSE:M) and those owned by The TJX Companies, Inc. (NYSE:TJX). Macy’s, Inc. (NYSE:M) is in a similar situation to Kohl’s: its earnings multiples are low (for example, the trailing P/E is 13), but earnings have not been particularly good, falling slightly in its most recent quarter compared to the same period in the previous fiscal year. The sell-side is more bullish when it comes to Macy’s but we still think we would avoid the stock at this time. The TJX Companies, Inc. (NYSE:TJX) has been reporting double-digit growth rates on both top and bottom lines, and even though some future earnings growth is already assumed in the stock price- the stock carries trailing and forward P/Es of 19 and 15, respectively- it might be worth looking into the company to see how sustainable those growth rates are.

We can also compare Kohl’s to Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT). Each of these large discount retailers trades at 15 times trailing earnings. Revenue growth at the two stores has been modest; while Wal-Mart managed to increase its earnings by 9% last quarter compared to the fourth quarter of its last fiscal year, Target’s was down slightly due to lower net margins. Wal-Mart Stores, Inc. (NYSE:WMT) in particular is also notable for its low market exposure with a beta of 0.4, which helps make it a standard defensive stock. Both Wal-Mart and Target Corporation (NYSE:TGT) are expected to grow their earnings at a similar rate going forward.

Wal-Mart, then, might be worth investigating as well as TJX in terms of alternatives to Kohl’s. Kohl’s and Macy’s seem to be having similar troubles in terms of their financial performance, and so even though they are trading at cheap multiples (and Kohl’s has this insider purchase as well) they don’t seem to be good buys right now as their current pricing only makes sense if they can keep their earnings steady to slowly growing over the next several years.

Disclosure: I own no shares of any stocks mentioned in this article.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!